Innolux quarterly profit first since 2011

PANEL PROGNOSIS:The firm’s president said supply constraints for small and medium-sized panels are severe, but it expects to do better in the second quarter than the first

By Lisa Wang / Staff reporter

Innolux Corp (群創光電), the world’s fourth-largest LCD panel maker, yesterday posted its first quarterly net profit in two years after its margin climbed to a three-year high of 20.7 percent and it shook off the impact of an anti-trust lawsuit.

That bodes well for business this quarter and for the rest of the year, as Innolux expects the trend to continue despite supply constraints, primarily for panels used in mobile devices and TVs.

“February is the bottom as we had expected. Business in the second quarter will be slightly better than in the first quarter, though it is still the slow season,” Innolux president Wang Jyh-chau (王志超) told investors.

Shipments of PC and TV panels are expected to grow by a high-teens percentage this quarter from last quarter’s 32.4 million units. PC and TV panels accounted for 77 percent of Innolux’s revenue of NT$116.78 billion (US$3.96 billion) in the first quarter.

“The shipment growth forecast is surprisingly good, considering the second quarter is still a slack season. This is a positive sign for the company,” said Calvin Shao (邵琮淳), who tracks the LCD industry for Fubon Securities (富邦證券).

Shao retained a “buy” rating on Innolux, but raised his target price for the stock to NT$22 from NT$19, implying about a 16 percent upside from Innolux’s closing price of NT$19 yesterday.

Wang attributed the growth to supply constraints, stemming from increasing TV sales and demand for mobile devices, such as tablets.

“Supply constraints of small and medium-sized panels is severe in the market. The shortage will be in place for the rest of year,” Wang said. “TV panel supply is also tight, as clients are still ordering in preparation for China’s new subsidy program for energy-efficient TV sets, which was originally set for June.”

Shipments of mobile devices are expected to grow by a low-teens percentage, Wang forecast.

The average selling prices of PC and TV panels are expected to fall slightly this quarter from last quarter’s US$90 per unit, he said.

Innolux swung back into a net profit of NT$1.68 billion in the first three months of the year, from a loss of NT$3.25 billion in the final quarter of last year. It lost NT$12.77 billion in 2011.

Operating income was NT$3.29 billion last quarter, up 2.8 percent from NT$3.13 billion in the fourth quarter of last year.

Shao, who earlier forecast Innolux would make a net profit of NT$1.36 billion in the first quarter, said he was impressed by the company’s better-than-expected margin.

Earnings before interest, taxes, depreciation and amortization margin rose to 20.7 percent last quarter from 18.4 percent the prior quarter and 9.1 percent the previous year, while operating margin improved to 2.8 percent from 2.4 percent in the final quarter of last year and minus-11.1 percent the previous year, the firm’s financial statement showed.

Non-operating losses shrank to NT$1.61 billion last quarter from NT$6.42 billion, which included a charge of NT$3.19 billion to settle price-fixing cases, the previous quarter.